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Amid a flurry of regulations and political activism against coal plants, one phenomenon has proved the most effective in killing coal in the United States: the arrival of cheaper, cleaner energy. Natural gas fuels the clean energy revolution by displacing dirtier coal, lowering carbon emissions, providing a platform for deployment of lower-carbon energy technologies, and creating economic surpluses that can be directed towards energy innovation. And while questions have arisen in the last several years regarding the local and global environmental impacts of the shale revolution, a survey of the empirical literature reveals gas to be a highly favorable environmental alternative to coal.

The rapid displacement of coal in recent years has allowed the United States to achieve the largest recent carbon emissions reductions of any country in the world. While natural gas poses significant environmental challenges, its benefits over coal are undeniable. Mercury pollution, sulfur oxides and nitrogen oxides, water intensity, and pollution-related costs and mortality are all reliably lower with natural gas than with coal. Methane leakage mitigation opportunities will typically prove profitable for drillers, and leakage’s effects on global climate change will prove relatively minor as long as policymakers sustain efforts to accelerate decarbonization.

While the prospects for zero-carbon technologies like renewables and nuclear are certainly affected by cheap natural gas, worries that the shale revolution will kill zero-carbon energy are overblown. Cheap, flexible natural gas generation will become more and more essential as variable renewable technologies like wind and solar achieve wider penetrations in electricity grids. And while natural gas has been partially responsible for some recent closures of nuclear power plants in the United States, the major challenges faced by nuclear power — high capital and refurbishment costs, regulatory uncertainty, and public skepticism — predate and overwhelm the competitive pressure posed by the American shale revolution. Zero-carbon technologies remain far more dependent on innovation policies than the relative price of natural gas.

The arrival of a cheaper energy technology to displace coal has provided more than $100 billion a year in economic benefits to the United States, and tens of millions in state and federal revenues. Within the next few years the shale revolution will have contributed more to the US economy than all cumulative federal expenditures on all energy industries since 1950. In light of the significant and multi-decade public-private investments that made the shale revolution possible in the first place, some portion of these benefits should be directed towards energy innovation policies and investments.

Energy transitions are not step-wise, perfectly sequential, or spontaneous. From whale oil, wood, and kerosene to coal, petroleum, and natural gas to renewables and nuclear, the evolutionary process from higher-carbon to lower-carbon energy has been accelerated by government policy. The American shale gas revolution offers vital lessons not just for the promise of public investments in energy innovation, but for the nature of decarbonization and how best to target energy and climate policies.

The rapid replacement of coal by cheaper and cleaner natural gas has helped drive emissions down in the United States more than in any other country in the world in recent years. Cheap natural gas is crushing domestic demand for coal and is the main reason for the rapid decline in US carbon emissions. The gas revolution offers a way for the United States and other nations to replace coal burning while accelerating the transition to zero-carbon energy.

In the United States, coal-powered electricity went from 50 to 37 percent of the generation mix between 2007 and 2012, with the bulk of it replaced by natural gas. Energy transitions typically take many decades to occur, and the evidence suggests that the natural gas revolution is still in its infancy. The successful combination of new drilling, hydraulic fracturing (“fracking”), and underground mapping technologies to cheaply extract gas from shale and other unconventional rock formations has the potential to be as disruptive as past energy technology revolutions — and as beneficial to humans and our natural environment.

This report reviews the evidence and finds that natural gas is a net environmental benefit at local, regional, national, and global levels. In recent years, the rapid expansion of natural gas production has provoked legitimate local concerns about noise, air, water, and methane pollution that should and can be addressed. But the evidence is strong that natural gas is a coal killer, brings improved air quality and reduced greenhouse gas emissions, and can aid rather obstruct the development and deployment of zero-carbon energies.

The coal-to-gas switch is not inevitable. Concerns about the environmental impacts of natural gas have kept shale fracking out of New York State and resulted in opposition to expanded natural gas production around the country. Gas production levels flattened in response to low prices; more recently, as such unsustainably low prices have risen, coal has regained some of its lost share in the energy mix. American policy makers will make a series of decisions that directly affect the pace of the global and American transition to natural gas. These decisions should be made with an eye to reducing the negative side effects of gas production, increasing production and consumption of gas, and reducing the production and consumption of coal — three goals that are consonant with both improved environmental quality and economic growth.

This report evaluates the key claims and counterclaims made about the environmental impact of natural gas production, and comes to the following conclusions.

1. The climate benefits of natural gas are real and are significant.

Recent lifecycle assessments studies confirm that natural gas has just half as much global warming potential as coal. The evidence suggests that the lower carbon intensity of natural gas far outweighs the warming caused by today’s level of methane leakage. Methane is about 20 times more potent as a greenhouse gas than CO2 on a 100-year basis, and about 70 times more potent on a 20-year basis. Early estimates of methane leakage at levels approaching 7 percent were outliers, and the best estimates of average leakage rates range between 1 and 2 percent. Additionally, methane leakage can be managed and will continue to decline as stricter state regulations enter into force and as the industry moves toward better well completion practices, better compliance with other best practices, and continued technological innovation. It is not the case that reduced US coal consumption has been offset by increased exports of US coal. From 2008 to 2012, annual coal consumption for US electric power declined, on average, by 50 million tons. Over the same four years, annual exports increased by only 14.5 million tons on average.

2. Cheap gas helps rather than undermines the development and deployment of zero-carbon energy sources like solar and wind, and does not significantly add to the challenges facing the nuclear power industry.

The deployment and overall development of many zero-carbon energy sources — including solar, wind, and nuclear — depends primarily on public policies such as mandates and subsidies, not on the price of natural gas. Rather than being opposed by natural gas, intermittent renewables like solar and wind depend on flexible generation to balance the variability that they introduce into the grid. Natural gas-fired power plants are ideally suited to this task. At present there are few scalable and inexpensive grid-scale storage options, which is why flexible, gas-fired power plants are critical to integrating large volumes of variable solar and wind farms. The corollary to this is that renewables tend not to displace nonvariable base load sources of energy like coal and nuclear, more often replacing natural gas. If it weren’t for natural gas’ flexible generation, renewables would have far less value as increasing contributors to the electricity grid.

The nuclear power industry has long faced numerous unique obstacles, including a complex regulatory process, lengthy construction times, high capital costs, frequent cost overruns, and public skepticism. The challenges faced by the nuclear industry, especially the building of new plants, are made marginally more difficult by the ongoing natural gas revolution. However, gas’s impacts on nuclear pale in comparison to its impacts on coal, and the long-term imperatives for nuclear power — technological innovation, modularization and standardization of design, and cost reduction — are not changed by the arrival of cheap natural gas.

With much of the world’s fossil resources expected to be extracted and burned in the coming decades, experts agree that carbon capture technologies will prove to be an essential component of technological portfolios to mitigate climate change. While carbon capture and sequestration technologies (CCS) are often considered in the context of new and existing coal-fired power, there are reasons to expect that CCS will be more easily developed and deployed with natural gas plants. The cleaner stream of emissions from natural gas combustion and the lower capital costs of gas plants make CCS retrofits and demonstrations attractive options for carbon mitigation.

The claim that new natural gas plants are a “sunk investment” and slow the transition to zero-carbon energy sources is undermined by the low-capital costs of gas electricity. The capital costs of new coal, nuclear, and renewable (wind, solar, geothermal, and biomass) power plants are typically several times greater than those of gas plants. In contrast to these other sources, the greatest cost of natural gas is the fuel, not the equipment. Variable operation and fuel costs can be as much as 70 percent of the total levelized cost of a natural gas power plant. By comparison, variable costs for new coal and nuclear plants are, respectively, only about 30 percent and 10 percent of the total levelized cost.

Finally, the low prices created by the shale gas revolution have generated more than $100 billion in energy cost savings every year since at least 2009, giving strong justification to critical subsidies and R&D investments by the Department of Energy starting in the early 1970s. The unconventional gas boom also generated $31 billion in state and federal revenues in 2012, revenues that are expected to grow to over $55 billion by 2025. By 2015, the additional wealth added to the American economy by the shale gas revolution will alone have exceeded the cost of all federal energy subsidies between 1950 and 2012.

3. Natural gas production generally and shale fracturing specifically have a far smaller impact on mortality and disease, landscapes, waterways, air pollution, and local communities than coal mining and coal burning.

This is not to say that there are no real hardships experienced by communities and individuals or negative environmental impacts from the expansion of natural gas production. There are, and they should be proactively confronted. But making a normative judgment about energy policy requires asking whether the impacts of gas production are more or less than the impacts of the fuel it is replacing, principally coal.

The environmental and community impacts of shale fracking are reliably far more modest than those created by coal mining and production. Whereas coal mining removes entire mountains and contaminates streams with hazardous waste, natural gas drill pads occupy only a few hundred square feet, and there are only a handful of cases of groundwater contamination by fracking chemicals. Whereas innovation in coal mining resulted in greater landscape degradation, innovation in gas fracking has resulted in less-toxic fracking chemicals, fewer drill pads, and better drilling practices.

Accelerating the shift from coal to natural gas should be one of the highest energy policy priorities of policymakers and the public. The revolution in shale fracturing and mapping technologies opens up the possibility for developed and developing countries alike to radically reduce consumption of coal in ways that accelerate rather than slow economic growth. Natural gas that is cheaper than coal makes it easier for the Environmental Protection Agency to impose more-stringent air pollution regulations on coal power plants. And cheap natural gas boosts higher rates of economic growth and national wealth to invest in developing its eventual zero-carbon replacements.

RECOMMENDATIONS

Accelerate the coal-to-gas shift in the United States.

Better state regulations and industry oversight should be encouraged to continuously improve the environmental performance of gas drilling, and to address public concerns about pollution and noise. Such efforts will help lay the groundwork for expanded natural gas production on public and private lands. Policymakers should also support the export of liquefied natural gas, which will provide greater price stability, helping the industry avoid the boom-bust cycle that stalled gas production in 2012. Policymakers should also consider including natural gas in any future clean energy standards.

Reduce coal consumption and coal exports.

The Obama administration should pursue stronger pollution and carbon dioxide regulations to make coal increasingly expensive and incentivize the switch to natural gas. Policymakers should support policies that would leave US coal in the ground, rather than mining it for export to Europe and Asia. There will be no net environmental benefit if all of the coal that the US was going to burn for its domestic electricity is exported abroad. US policymakers could reduce global coal supplies and encourage gas production by restricting and eventually halting all US coal exports.

Export natural gas technologies to coal-dependent countries.

The US and global development institutions should promote gas exploration in other countries in ways that accelerate economic development and improve local environmental quality. Such an effort would align United Nations energy access goals with US and international climate goals. It would help China, India, South Africa, and other developing nations to reduce air pollution and meet growing energy demand. And it would help diversify the number of energy exporters around the globe, reducing some of the geopolitical risks associated with geographically disproportionate energy reserves.

Pay it forward.

The shale gas revolution has contributed more than $100 billion to the economy every year since 2009 in the form of lower energy prices. Within five years the economic benefits from shale gas alone will pay for all US energy subsidies since 1950. The critical role that US subsidies played in enabling the shale gas revolution, and its extraordinary economic benefits, suggests that policymakers should make long-term investments in innovation of renewables and nuclear energy. The rapid gas revolution in the United States demonstrates the effects of sustained public-private technology investments, providing a model of a successful energy transition for zero-carbon options like renewables and nuclear.